Electric Power

Executive Summary

The EPA is expected to enact several key regulations in the coming decade that will have an impact on the U.S. power sector, particularly the fleet of coal-fired power plants. Because the rules have not yet been finalized, their impacts cannot be fully analyzed, and they are not included in the Reference case. However, AEO2011 does include several alternative cases that examine the sensitivity of power generation markets to various assumed requirements for environmental retrofits. In addition, a case with an explicit price on CO2 emissions is also examined.

Market Trends

Electricity demand growth has slowed in each decade since the 1950s. After 9.8-percent annual growth in the 1950s, demand (including retail sales and direct use) increased 2.4 percent per year in the 1990s. From 2000 to 2009 (including the 2008-2009 economic downturn) demand grew by 0.5 percent per year. In the Reference case, electricity demand growth rebounds but remains relatively slow, as growing demand for electricity services is offset by efficiency gains from new appliance standards and investments in energy-efficient equipment.

Issues in Focus

Capital costs are a key consideration in decisions about the type of new generating plant or capacity addition that will be built to meet future demand for electricity. Capital costs for new power plants include materials, skilled labor, and generating equipment. For AEO2011, EIA commissioned a study of the cost components for different utility-scale electric power technologies, with the goal of presenting costs for different plant types in a common set of cost categories to facilitate comparison of capital costs. A major change from previous years in assumptions for the cost study included a significant increase in the assumed costs for coal and nuclear power projects [58].